Tariffs are Anti-Liberty Market Manipulators

Company A is in Country A they product the widget that goes in a wadget. Company A's widget costs them $.30 cents to manufacture and they sell it for $1.00. This gives them a profit of $.70. This might on first inspection be considered a large gross margin, but that seventy cents is further diminished by marketing, by transportation, by the shared costs of labor not directly involved in the widget's production. Let us then make a leap of faith without going into the construction of every facet of labor and costs to assume that after everything is taken into account the net profit of each widget is $.10.

Company B in Country B produces the same widget that goes into the same wadget. Their manufacturing process is exceptionally more complex and they have a cheaper labor force. Company B can do this because the actual cost of the widget is spread out across the Country by the invasive redistribution of cost called taxation. Also, the number of people with incomes is 10x more than is available in Country A. This means that the pool of available wealth that Company B can take advantage of is greater than it is to the 'free' market of Company A.

Taxation - Normally conservatives consider taxation the redistribution of wealth to less fortunate 'individuals'. That is, if rich people have health insurance and poor people do not have health insurance, then the rich people should be taxed for the costs to procure health insurance for the poor. This is the epistemology that has been fed to us about what taxation is defined as. In reality - and this can not be stressed enough - taxation is the redistribution of costs. This is because, when a poor person sees a doctor, the doctor will need to be paid. The cost of the visit, the cost of carrying the policy, the cost of the medication, the follow-up, etc. needs to be paid to the people involved in the process. Taxation has simply moved the owner of the cost from the individual involved in the doctor visit, to a group of other people who have taken on the requirement to pay it. That is a different definable way of approaching taxation because the more common definition makes it appear that the poor themselves are getting the wealth from the rich: that a man in a government uniform takes a bag of money from a rich person and hands it to a poor person. It may seem like a subtle difference, but in the creation of definitions, subtlety is the name of the game.

Company B can produce their widget for $.03 and can sell it to the customer that makes the wadget for $.30 and still come away with an exact net profit of $.10.

Let's say that the wadget is manufactured in Country A so for a time Company A was the sole supplier for the company that produces the wadget. But rising costs of labor, taxes (don't forget that the redistribution of costs affects company profits), new competitors, and local consumer expectations of pricing going down have caused the wadget company to start looking for ways to cut their own costs. They find Company B and begin procuring the widget. At first they see a surge in their margin; after all, they were buying the item for $1.00 and are now buying them for $.30.

Company A starts feeling the pinch of lost revenue and suggests to the government that Company B is using its form of government as a method to control market costs, which of course is not untrue. Company A's government agrees and institutes a tariff for the widget coming from Country B. The tariff forces the wadget company to pay the difference in taxes.

Company A does not need to work on any methods to increase their production capability, to find ways to make their parts cheaper, to innovate the technology, etc. They have now in fact put in place a market manipulator that they can adjust and use to validate the costs of items around no concrete market indicators, they can instead, set arbitrary costs for their products and freeze the value where they want them.

Company B, of course, does not suffer, because they can play the game too. Buy moving their manufacturing to Country A for this particular part they are now allowed to charge $1.00 for the widget and still take advantage of Country B's redistribution tax policy.

Now let's take on the argument that the proponents of tariffs put forward. In a nutshell, they believe that adding additional costs to a product will force the consumer of that product to look elsewhere for the item and thus, cause the producer to change their pricing structure to appear 'less competitive'.

Company B would be expected to increase its price. If Company B did, in fact, look at the market price and increased the price of their widget to $1.00, they could then ask Country B to sue Country A for unfair price controls showing that they too are competing in the market at the same pricing as Company A.  Company B would clearly win the court of opinion; because the average person would consider it unfair to charge Company B with an additional cost if there was no 'unfair' advantage by their pricing model. If both companies charge $1.00 for the part then the wadget company could purchase the widget from either company, a fair 'market value'. Company B would also win in that every penny over their $.30 price is additional margin and in no way would damage their business, but instead would increase its wealth. Of course, to incentivize the wadget company maker, Company B could add value to their widget (free shipping, specialized customer support) all fitting in their new pricing model, and still make a net profit that was better than Company A.

Traditionally speaking, though, companies in the position of Company B do not make this choice (increasing their pricing to take advantage of 'free-thinking amongst equal people'). Instead, they do everything they can to lower their price. That's right, where they were already, according to Country A's opinion of pricing, gouging the market with such below-valued product, they work on ways to make the product even cheaper. This, of course, is also good for Company B, because it means they innovating technologies and changing paradigmatic structural thought on manufacturing. Meaning that the actual wealth, the intellectual ownership of new ideas, is profitable in Country B more so than in Country A. Intellectual profitability is and should be a major factor in a corporation's opinions on its future, more so than raw gross margin. In fact, "Margin" should include intellectual margin as a defining measure.

Anyone that reads these papers knows that I'm not exactly conspiracy lite. So, I feel in order to really understand, we need to be able to suggest that these so-called trade wars are not real, that it is a ruse to increase profitability for all involved. A constant one-upping of pricing increases by different state-run agencies owned by company's that send lobbyists whose sole job is to use government as a method to manage their pricing. It's possible. Improbable by not impossible.